Hi, my co-founder and I are building a SaaS business for we call the B2Side Hustle market (even smaller than SMB) We have several paying customers right now in a month of full time work.
We were approached by a company that would give us access to about 20,000 paying customers. However, they want equity and a lot of product control in exchange for being that first large customer. They have proposed funding the company in exchange for 51%. We haven't yet talked about what "funding" the company means. 51% seems like a lot of dilution out of the gate. It's clear they want a lot of control over product direction. I worry about being held hostage to them and never being able to truly take the product to market.
How would you think about this question?
If that's their approach, my question would be why they don't just buy the entire thing from you and you can go do something else? Or you could become an employee. But it sounds a little like they want your work/IP for cheap. I have no idea what they're offering in return.
Alternately, why can't you simply have a referral program. You can share revenue on the customers they direct your way, but they just make money and have no input.
I'm curious why they think they need product control. Really, if they want control they should either buy it outright and turn you into an employee, or buy it and let someone else run it who doesn't have a stake.
Maybe I'm wrong on all counts. I just hope they're not full of hot air and mess you up by dangling a carrot on which they don't deliver.
Whomever possesses 51% controls the entire company. If you have 49% and the other guy has 51%, by majority rule you can be fired at any moment. Can this company actually deliver 20,000 paying customers? If so, that might make you a wealthy man, so you could structure a deal where the equity is proportional to sales targets met by them. If they reach $20 million a year in revenue, by all means give them control, as long you have a long term contract and make a very clean contract that protects you against termination. A lot of the golden parachute contracts that executives write ensure that if they are sacked they get a huge payday. The greatest such contract in history was that for Michael Ovitz, who was hired by Eisner to take over Disney, but was fired a few months later as he couldn't do the job at all, and his payout was around 109 million... not bad for failing miserably. Getting a lot of customers is more than 50% of the effort of building a company. In many startups they spend 80% on sales and marketing before reaching profitability. But most sales people promise the moon and deliver a pizza... so you must have very firmly defined revenue targets. Don't for example insist on 20,000 customers; you could get 20,000 people who are paying 1 cent a month... that won't do you any good. You have to imagine when drafting these agreements every possible thing a devious person could do to trick you. America is only a medium honest country, and it is a popular sport to trick entrepreneurs who are way better at designing and building a great new product than writing agreements. That is why the VC's are billionaires and most founders are not.
Thank you for your response and interest to work with our company. We must let you know at this time that your employment with us will be part-time as you can still keep your current job and work with us simultaneously,your time to work with us will be between 1-3 hours. Haven introduce our company to you, please see the what the job entails.
The roles of Xinyi Glass Ltd. USA Australia, Indonesia and Canada executive regional are outlined below:
1. Communicate with customers within your regions via telephone and email means when necessary.2. Receive payment(wire transfer,check,direct deposit etc) on behalf of the company from customers within the United States, Australia, Indonesia and Canada region.3 Help manage our company’s presence and payments for products purchased.
PLEASE NOTE: You are NOT required to spend your personal money on any part of this job, Xinyi Glass Ltd. will be responsible for all expenses (if any) which will be sent to you when needed.
COMMISSION: We have a Corporate and Individual position opened. For Corporate, your company will be paid on a commission basis of 5% (i.e. 5% of any amount received and processed on behalf of our company) and $10,700.00 USD monthly payment. While for Individual position, you will be paid 5% commission for any amount received and processed on behalf of our company and a monthly payment of $5,200.00 USD. If it is acceptable to you,please fill out the below questionaire for the position(Individual or Corporate) type you choose to enable us prepare and send our company Memorandum of Understanding to you which is our standard agreement that will define our business relationship/partnership.
1. For Individual InformationFull Name:Residential Address:Occupation:Home Phone:Mobile Phone:Fax:Email:Date of birth:Sex:Any Form Of ID Card:
2. For Corporate/Company InformationFull Name:Company Name:Company Address:Contact Person:Position Held:Office Phone:Home Phone:Mobile Phone:Email:Date of birth:Sex:Any Form Of ID Card:
Our agreement process is simple and flexible to suit both our company and our partner(yourself) around the world,you can review the document carefully and thoroughly before you embed your signature.Let us receive the above requested information for us to perfect the agreement.
We hope to hear from you soon.
SincerelyMs. Li Yang.www.xinyiglass.com
Xinyi Glass Ltd Email